What YOU CAN DO if your business is struggling financially through COVID-19
Are you a director of a small or medium business, impacted by COVID-19? As the director, it is important to realise that it is your legal duty to ensure that you monitor the financial position of your business so that you can pay debts and bills as and when they are due.
Interim relief measures have been introduced by the Australian government in response to the Coronavirus (Covid-19) situation may be able to protect you from personal liability in the event of insolvent trading for debts that have arisen in the course of running your business.
It is extremely important that you as the Director seek the best appropriate advice from a trusted adviser (such as an accountant, lawyer or a registered liquidator) early on as you recognise the mounting issues and if you recognise that you will encounter difficulties paying your debts on time or when these relief measure come to an end.
ASIC has reported that the weekly insolvency statistics have identified a significant decrease of small business insolvencies in the 12 weeks leading up to June 2020. This is a cause of significant concern because it means there are small businesses out there who may just be too reluctant to seek advice about the financial situation they were in and may be facing as a result of the COVID-19 pandemic.
Are you one of those businesses? What can you or should you do?
1. Seek advice from a reputable and trusted adviser
If your small business has been significantly impacted by COVID-19 resulting in a downturn in revenue, or you are a creditor whose clients or suppliers are facing financial trouble, it is important to seek advice as soon as possible.
Signs that may indicate that your business may be facing financial difficulty include
- Ongoing losses,
- Poor cashflow,
- Unpaid creditors outside usual trading terms or
- Problems obtaining finance.
2. Temporary relief measures instituted by the Government during COVID-19
The Australian Government announced on 24 March 2020 a six-month temporary relief for small business directors from personal liability for insolvent trading for debts incurred during the ordinary course of running their business. On 07 September 2020, they announced that this temporary relief would be extended until 31 December 2020.
However, despite this temporary relief, as a Company Director, you are still required to do everything you can within your means to minimize the risks of trading while insolvent. This includes you keep on top of the financial position of the business and reach out to seek advice from a trusted adviser when needed.
As and when COVID-19 restrictions continue to lift, many small businesses may need extra working capital to reopen as well as restart their businesses. Under the Coronavirus SME Guarantee Scheme, the Australian Government will provide a guarantee of 50% to SME lenders, such as banks, for new unsecured loans to be used for working capital.
There are also other interim relief measures including JobKeeper, temporary debt relief for individuals and businesses and other support for small business/employers that can be of a great assist to small businesses to help them with their cashflow. These includes measures such as providing relief for commercial tenants.
3. It is not too late to take steps now!
There are some small businesses who may not have to pay their rent for a short period of time due to these measures and may also have some other debts or interest payments temporarily deferred. However, these debts are more than likely to be payable once these relief measures stop.
It is not too late for small business owners to take steps now to get advice on where their business’s financial position sits and the future prospects of the business once these relief measure are withdrawn.
It is also just as important to engage with suppliers, bank and lending representatives as soon as possible to discuss any other viable options for your business.Your business may ne some restructuring in order to remain financially viable and to operate in the future.
Having an understanding of the financial position of your business, getting early advice from a trusted adviser like AB Debt Advisor and acting on that advice in a timely manner will more than likely ensure the viability and chances of your business continuing post COVID-19.
The role of the team at Bankruptcy Advisory Centre is to provide you and your business as many options as possible to relieve the pressure of the financial burdens you may be facing. Get relevant information today to make an informed choice on your next steps. Contact us at 1300 887 210 for a complimentary first consultation.
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